Catherine Desmond, Private Client Partner and farms and landed estates specialist, looks at the impact that tax changes announced in Autumn Budget 2024 could have on business owners and agricultural landowners.
In this week’s budget, the Chancellor announced several tax increases aimed at addressing fiscal challenges and funding for public services.
Budget tax rises will increase business costs
Unfortunately, business owners will bear the brunt of some of them. Key tax rises in the budget include:
- Increase in the rate of employer NIC to 15% and a cut in the secondary threshold to £5,000
- Increase in the national minimum wage and apprentice wage
- Increase in the main rate of capital gains tax to 24% from 30th October 2024
- Reforms to Business and Agricultural relief for inheritance tax
The NIC and minimum wage changes will push up costs for all business with more than a handful of employees – some will be able to pass these onto their customers, others will not. That may mean either lower profits or making do with less employees. There is some good news for employers, however, with the increase in the Employment Allowance for NIC to £10,500.
Capital Gains Tax and Business Asset Disposal Relief
The changes to CGT were less drastic than predicted. The rates are aligned for residential property and all other gains at 18% for basic rate taxpayers and 24% for higher earners. There are anti-forestalling measures for gains realised but not completed before 30th October and anyone affected should seek advice by getting in touch and speaking to our expert tax team.
Business asset disposal relief is still available for £1M of capital gains during a lifetime, but gains will now be taxed at 14% for disposals after 5th April 2025 and 18% for disposals after 5th April 2026.
Stamp Duty Land Tax
The additional Stamp Duty Land Tax (SDLT) charge for individuals purchasing a second residential property has been increased with effect from 31st October to 5% rather than the previous 2% and this also applies to companies purchasing residential property.
Inheritance tax changes and the impact on agricultural landowners
With regards to inheritance tax, whilst the nil rate bands have been left unchanged, Agricultural property relief (APR) and Business property relief (BPR) will be reformed from April 2026.
100% relief will continue to be available for the first £1M of agricultural and business property (combined), with 50% relief applying to amounts above this. This will mean a 20% rate of tax on any amounts above the £1M limit.
There are very few farms in the UK valued at £1M or below, potentially bringing a whole sector within the scope of inheritance tax charges.
There were no changes announced to capital gains tax holdover reliefs for trading or agricultural assets, so the focus may shift to planning for lifetime gifts as far as this is possible.
The new limits to the reliefs will also apply to trusts and those with trusts containing these assets will need to take advice on budgeting for 10-year anniversary or exit charges.
There are anti-forestalling provisions for the inheritance changes above, which means that the impact on planning starts for most from 30th October 2024.
Unused pension funds and death benefits payable from a pension will also be brought into a person’s estate for IHT purposes from 6th April 2027, so we expect to see a shift towards moving business and agricultural property during a person’s lifetime and then utilising their pensions to live on rather than the opposite advice that some may have had up to now.
We will be analysing papers published by the Government and consultation that will happen around the detail of these measures as they progress.
For tailored advice on how the changes outlined above and the Autumn Budget 2024 in general may be set to impact you and your future finances, contact us today to discuss your situation with one of our tax experts.
Read about other key measures from the Autumn Budget in our full budget summary.
